Why don’t dairy farmers just…?

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Of course, Mike is right. You can’t walk into a shop and demand a box of cornflakes at a fraction of the cost.

You can’t cut someone’s wage because your business is losing money. Nor can farmers choose to pay less for stockfeed, electricity or shire rates just because the price of milk has fallen.

We dairy farmers are in a uniquely vulnerable position. We shoulder almost the entire risk in the dairy supply chain. It stinks. It’s grossly unfair. And when you read stories like Appreciating Australian Agriculture‘s below, it’s harrowing, too.

 

AppreciatingAusAg

So, if we have both guts and brains, why do we let others set the price for our milk? The reality is that dairy farmers have little choice in the matter.

Why not stop sending milk? You cannot switch cows on and off. You have to milk them every day, no matter what, and their milk needs to be sold within two days. It can’t be stockpiled until buyers offer a reasonable price. Of course, you could sell all your cows but then how would you pay your mortgage?

Why not find a buyer who will pay more? Because there are only a handful of buyers and they all offer about the same deal. They tell you the price of your milk. If their sales strategy goes sour, you get paid less. Anyhow, right now, few milk processors around here are willing to take on new farmers. You’re stuck right where you are.

Why not sell the milk direct? Yes, a few farmers do. It costs a six-figure sum to set up a processing plant and takes about a year to get it approved by the regulators. Running that plant and marketing your dairy products is another full-time job on top of dairy farming. It’s also another completely new skill set. In any case, not many farmers have deep enough pockets to establish the plant and endure the inevitable losses during the time it takes to become commercially successful.

Why not just sell the farm and do something else? Well, that’s a question plenty of farmers are asking, too, but it can take years to sell a farm and we do it because we are good at it and we love being farmers.

The reality is that when a few thousand small family businesses sell a highly perishable commodity to a handful of very large corporations, the playing field is anything but even.

 

10 thoughts on “Why don’t dairy farmers just…?

  1. And this is exactly why we need a National Milk Pool to protect our great industry now and into the future

  2. With questions now being asked about whether members of Fonterra’s upper management team should be following MG’s lead and resigning over the unsustainable price matching – which has lead to the devastating claw back program, Fonterra reps are now blaming the Bonlac Supply Agreement saying that it gave Fonterra no option but to match MG’s price. Is that true, and if so, why would any company intentionally bind themselves too and put themselves (and their suppliers) at the mercy of anothers unrealistic pricing policy?

      • Have since been told that Fonterra only has to match the yearly price. They could have offered lower price throughout year and then given step up if necessary to meet the supply agreement. Still not sure exactly whats true but this makes more sense than legally binding yourself to another companies management skills.
        Hard to get the right information as Fonterra reps (at least here in South-West Vic) are very adept at spinning the truth unless you know exactly the right question to ask – which is usually only possible when you know the answer anyway!

  3. Quite incredible that Coles and Woollies with the cut price milk have wrecked such havoc in the dairy industry and that Governments have allowed this to happen. My heart goes out to the dairy farmers and I hope that the Government can turn this around but won’t be holding my breath. I refuse to buy anything but branded milk, Real Milk or Maleny here in Qld and same with yoghurt but we can’t get that message to the City,. Dairy needs a champion with a high profile to get the message out there such as Bumpa and the drought convoys.

    • Coles and Woollies are one of the larger elephants in the room that no-one really wants to discuss. There are others but this one is a big bull, certainly it is what drove (conveniently for Gary Helou) Murray Goulburn to pursue the $500m for capital upgrades to meet their obligations to Coles and Woollies.

  4. Very interesting reading about why don’t dairy farmers just sell up,easy to say hard to do , what does the farmer do then, for some that’s all they know, second and third generation farmers,,Younger farmers still need an income somewhere to live older farmers might be able to retire I left the industry 12 years ago and still miss it my father ended up selling the farm and retired soon after , he is in his 80,s and still wants to go back farming and hates retirement .What is happening in the industry is bad management on behalf of the big companies The industry has and always will have highs and lows, one can only hope all farmers will still be out there getting the cows in for the next milking, watching you neighbour has never been so important than it is now, it’s not just a matter of leaning over the back fence and saying Gday ,it’s knocking on their door and stopping for a cuppu ,,,

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